2025 CFA Level II Exam: CFA Exam Practice Question

CFA Exams
CFA Level I Exam
Topic 3. Financial Statement Analysis
Learning Module 11. Employee Compensation: Post-Employment and Share-Based
Subject 1. Pension Plans

CFA Practice Question

There are 423 practice questions for this topic.

CFA Practice Question

Companies generally design pension plans that are

A. contributory or noncontributory.
B. insured.
C. qualified.

Correct Answer: C

Tax incentives are a powerful motivation for firms both to create pension plans and to overfund them. Contributions to qualified pension plans are tax-deductible and the income earned by the funds is tax-exempt.

User Contributed Comments 1

User	Comment
blackyosh1	qualified plan: employers contributions are deductible as a business expense but are not taxable income to employee until they are received as benefits. investment earnings on funds held by trustee for plan are not subject to income taxes as they are earned nonqualified plans: employer funding contributions cannot be deducted as business expense unless classified as compensation to employee, in which case they become taxable income for employee. basically no tax benefits. usually for highly paid executives benefit?

User

Comment

blackyosh1

qualified plan: employers contributions are deductible as a business expense but are not taxable income to employee until they are received as benefits. investment earnings on funds held by trustee for plan are not subject to income taxes as they are earned

nonqualified plans: employer funding contributions cannot be deducted as business expense unless classified as compensation to employee, in which case they become taxable income for employee.

basically no tax benefits. usually for highly paid executives benefit?

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